How To Get Paid When There Are Insufficient Funds In A Receivership

by Ervin Cohen & Jessup LLP

QUESTION: Because there were not enough funds in the receivership estate, the court has ordered the plaintiff to pay my outstanding fees. The plaintiff, however, has refused to pay me. What can I do to get paid?

ANSWER: Because the word “judgment” is defined differently in different sections of the Code of Civil Procedure, you can enforce your order the same as a judgment. Section 577 of the C.C.P. defines a judgment as: “The final determination of the rights of the parties in an action or proceeding”. Because the receiver is not a “party” in the action, the court’s pronouncement that the plaintiff has to pay your fees would, at first blush, appear not to be a judgment but rather an order; which is defined in §1003 of the C.C.P.  as: “Every direction of a court or judge, made or entered in writing, and not included in a judgment, is denominated an order.” The section further enforces the notion that the court’s direction to the plaintiff might not be a judgment by providing that “an application for an order is a motion.” Because the court’s pronouncement was most probably the result of your having filed a motion to approve your final account and report, the direction might seem to be an order. Generally, if parties fail to follow court orders, the method to coerce enforcement is contempt (C.C.P. §1298 et seq.). Therefore, one might logically assume that only method to enforce the court’s order is by instituting a contempt proceeding; which is burdensome, expensive and often unsatisfactory. But wait, this assumes the law is always logical and consistent, which it often isn’t. In fact, the Enforcement of Judgments Law (C.C.P. §680.010 et seq.) actually has its own definition of what constitutes a judgment. “Judgment means a judgment, order or decree entered in a court of this state.” Therefore, voilà, the order is actually a judgment and can be enforced as such. You can record an abstract of judgment, obtain a judgment lien, get a writ of execution, levy on bank accounts and other assets, garnish wages and use all the other enforcement methods granted to a judgment creditor.

My suggestion is that you immediately obtain and record an abstract of judgment in all counties where the plaintiff resides or may own real property (C.C.P. §697.310 et seq.) and file with the Secretary of State in order to obtain a judgment lien on personal property (C.C.P. §697.510 et seq.). If you are not in a hurry to get paid, the recording of these liens is an inexpensive way to preserve your rights and ultimately get paid. When the judgment debtor attempts to buy or sell real property, your judgment will have to be dealt with. Also remember, because you have a “judgment” pursuant to the Enforcement of Judgments Law, you are entitled to interest on the unsatisfied portion of your judgment at 10% per annum (C.C.P. §685.010). This alone, if brought to the plaintiff’s attention, may persuade him or her not to dally. It is also important to note that while it is customary in insolvent estates for courts to require the plaintiff to be responsible for any unpaid receiver’s fees and costs because the plaintiff instituted the proceeding and, arguably, the receivership was for the plaintiff’s benefit, the court has the discretion to require either party, or both, to be responsible for paying the receiver’s fees and costs.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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